Credit scoring system in PH pushed

The Philippine banking system should have a credit scoring system that would enable banks to better serve customers and at the same time, reduce the number of non-performing loans in consumer lending, FICO, a global provider of analytics and decision making services, said.

In an interview with The Manila Times, Burton Crapps, FICO’s country director for the Philippines said the consumer lending in the country is growing very rapidly as banks are being pushed by the Bangko Sentral ng Pilipinas (BSP) to provide equal access to everyone.

“The market is growing, it’s a vacuum that we found here and the consumer lending departments of banks are expanding,” Crapps said, citing data from the BSP that showed consumer loans by universal, commercial and thrift banks rose 16.9 percent to P702.6 billion in the third quarter of 2013.

However, he said, consumer lending in the country is still in its nascent stage and getting access to lending in the country remains difficult because a huge number of Filipinos do not even have a bank account.

In 2012, a BSP survey showed only two out of 10 Filipinos had bank accounts.

“We want to develop a standard scoring system so that the banks, micro lenders and all the lenders are able to look at everybody equally in terms of consumer lending. We want to help the Philippines to develop a standard in consumer lending—a credit score—that gives everybody an equal chance at being measured by lenders,” the FICO country director said.

Crapps also said that giving an average person access to lending through a credit scoring system will help banks to manage and rate that person, as well as prevent the risk of “bad loans.”

FICO cited a Standard and Poor’s Ratings Services warning that the gradual shift in bank lending to Filipino consumers could tip up the amount of non-performing loans in an economy just beginning to find its footing.

“Banks don’t have a way to really qualify and risk-rate a person to determine if they could get a loan,” he said, adding that one of the initiatives of FICO is to interact with the BSP to develop programs that would improve consumer lending in the country.

Being a global company, FICO worked with different federal banks and central banks in developing policies on how banks do lending. FICO also provides analytics and decision-making services—including credit scoring—intended to help financial services companies make complex, high-volume decisions, Crapps said.

“In the Philippines, what we are trying to do is to help the central bank in developing comprehensive policies that they can pass down to the banks that will help these banks to predict trends, consumer spending and lending so that banks can regulated themselves carefully and properly, as well as lend the right amount to the right people,” he added.